pipefit
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RE-I’m not saying they won’t hit you with outrageous fees, for example if overspend your gold value. But when I say ‘bank’, what I really mean is is an institution that cannot engage in fractional reserve banking.
Example. You deposit an ounce of gold in the bank, at agreed upon terms, for a specific length of time. (maybe they must pay your account an ounce of silver per year. You give the bank permission to loan your one gold ounce out to someone that wants to buy a car. The length of the term of the auto loan must match your deposit contract with the bank. No lending long and borrowing short. Will slizzards find a way around the rules? Probably. But that is much different than today, where there absolutely no rules what-so-ever.
Hi RE-I’m not sure what you mean by ‘digital gold’. If you reread my post, you will see that I specifically said DEBIT cards, not CREDIT cards.
As you seem to be aware, there are many forms of paper gold floating around right now, including futures contracts with scant warehouse gold to back claims, long and short. I would agree that there is a ponzi critter in there somewhere. Also, the gold ETF’s are said to have dubius backing, from a physical gold standpoint.
That is not what I’m talking about. I’m talking about a person, such as yourself, that takes an ounce of gold to the bank, and leaves with a debit card that has one ounce of gold of buying power. You go to the store and load up grocery cart, and pick out your flat screen TV, and then you swipe your card. Your receipt, if it shows your balance, would say that you have 9/10 of an ounce of gold on your card, if your purchase cost 1/10 ounce.
If your employer owes you an ounce of gold, he can hand you the ounce, or you can opt for direct deposit.
I would expect a bi-metal system, (or even tri-metal) would emerge, and you would pay with silver dimes at small out of the way places, and even copper coins to pay token expenses.
“…………to prop them [banks] up instead used to help the people whose money it is – or was, more accurately – in the first place?
Are you sure the trillions of Euros used to prop up the banks really exists? Same with dollars and Yen. What if a dictator somehow seized power, worldwide, and declared all fiat null and void?
Would that stop Saudi Arabia from trading oil for oranges? Or you from trading your labor for a plate of steak and potatoes?
Fiat currency has gone well beyond the concept of money, and is now off in some other universe. It will be almost impossible to go back the other way, to strictly paper bills. We are going to have to go back to commodity money of some sort, at least for a few generations. With modern debit card technology, this will be easy. Just don’t be a bag holder of fiat, lol.
According to the CIA fact page for Spain, the economy breaks down as 4% agriculture, 24% industry, and 71% services as a function of labor force participation. Again, referencing the CIA web site, the USA is less than 1% of the labor force in Agriculture.
It seems to me that this is a big inefficiency for them. Agriculture is important there, but not near as big as in the USA, yet they have 4% of the work force employed?
This is probably one of those banana republics that should never have joined the Euro zone in the first place. The best way to see the mindset of the Spanish people is to read about the legal fights every time an old Spanish ship from the colonial period is found by a salvage operator. The salvage guys claims the loot, based on international law. The Spanish claim the loot (often gold and silver coins) based on national heritage. But they never mention that the gold and silver was stolen from native Americans, during the process of committing genocide.
Don’t get me wrong, I’m not saying that every last wrong must be atoned for, but you gotta at least make a token effort. Especially since you [Spain] are about to be on the receiving end.
Good article. However, I disagree on how to define a tipping point. In the case of a camel, it might very well be a specific straw that, when added, causes the legs to buckle. In the case of climate change or human population, I think we can have less well defined tipping points.
Once 99% of the water that can be easily routed into irrigation canals has been diverted, then a tipping point has probably been reached. From that point forward, average human calorie consumption will decline in direct proportion to population increase, with an adjustment for genetic improvements.
In the case of climate change, once the permafrost melts, releasing a whole new source of methane, that is probably a tipping point, even if the associated warming doesn’t happen for a decade or more later.
In the case of the financial markets, there is too much manipulation to sort it out. You would have thought that a tipping point would have been reached long ago, with federal spending, on a GAAP basis, at 40% of GDP.
That is just anecdotal. Only a judge can authorize the confiscation of funds from someone’s paycheck. The government can confiscate income tax returns without court order, but a clever taxpayer could get around that one easily, just by always owing a bit of tax at the end of the year.
As RE said on the other thread, you cannot confiscate what isn’t there. We’re talking $219/month here. Give me a break. They have loaned out a trillion dollars, and the total is rising rapidly. It is a ponzi scheme, plain and simple. The economy isn’t expanding fast enough to push up wages and employ these borrowers, assuming they are learning anything of value, which is debatable.
Even if they go after spouses, parents, etc. that would just be sucking money out of the economy and push us farther into recession. The whole point of student loans is to push more credit into the economy and keep the mirage going.
Once the music stops, the dollar will quickly lose almost all of its buying power. I’ll give it five years, max.
Jal said, “Therefore, a way must have been found to avoid debt slavery and save our society.”
There is a way. It is called ‘hyper inflation’. This is the way every prior financial mania has ended, and it is how this mania will end. As Ashvin noted above, it might be slow in coming, especially for those folks on the verge of bankruptcy. But within a few years, you will be able to pay off your student loan with a burger flipping job.
You might not be able to feed yourself, without stealing food from your employer, but you will easily be able to pay off ten’s of thousands in student loans with minimum wage work. I just don’t know if it will be next year, or five years from now.
What the deflationists fail to grasp is that the default of student loan debt will be inflationary, not deflationary. Since the taxpayer will ultimately pay, and since the people defaulting on the debt are, to a large extent. the taxpayer, you have a William C. Escher type of semi-closed loop. Only in this case it is a financial one, not a stairway in a painting.
On a GAAP accounting basis, the ANNUAL amount of fiscal deficit is about $6 trillion (according to shadowstats), which is 40% of GDP. This explains why gasoline is so much higher in price, even as demand is falling through the floorboards. Nobody, even Saudi Arabia, can sell crude oil for less than the cost of production for very long.
The government cannot afford a collapse in the USA’s university system. It is a crucial part of the Orwellian group think apparatus, particularly in terms of economic doctrine (Keynes good, Marx, Austrians bad, lol). So student debt will eventually be forgiven, and paid by Bernanke, as the fed expands their balance sheet by yet another trillion, at some point.
“Sometimes, there is almost a distracting quality to these discussions, [about banks]…”
Agreed. Part of the problem is the scale. Most people cannot really understand the concept of a billion dollars. $50 thou a year for 20 years is a million dollars, so the average person can understand a ‘million’ dollars. But 1000 times as much, a ‘billion’? Doubt it.
And now we are into trillions, which is a million times a million. If Ben Bernanke said tomorrow that he would write a check for $100 trillion, to pay off the national debt, plus fund all the unfunded liabilities of social security, medicare, etc., the average person would think, “yeah, good idea, write that check, why the heck not.”
Obviously, since us serious types are hoping for an orderly unwinding of this world order ponzi scheme, often referred to as ‘post Bretton-Woods’ financial regime, we’re hoping he doesn’t write that check just yet. What is frustrating is that there doesn’t appear to be any progress on an alternate course of action.
Another deflationist who apparently doesn’t buy gasoline, food, health insurance, etc. Yes, we’re all aware that the Greek restructuring destroyed $100 billion Euros of capital. And it was immediately preceded by the creation of $1 Trillion Euros of LTRO fiat by the ECB (fed’s little brother, lol).
ash–“This trend is an important reminder of how market instability does not necessarily equal a market crash or collapse – all of these outflows occurred during a 20% rally in the market from its October lows.”
True enough. But stepping back a bit, one can see that the S&P 500 is about where it was in 1999, 13 years ago. How much cpi inflation has there been since then? Well, a gallon of gasoline costs 3 times as much. Or, you could say that a unit of spy or $spx buys 1/3 as many gallons of unleaded regular gas as in 1999.
When are you deflationists gonna throw in the towel? This is a deliberate debasement of the money supply. They can’t just tell everyone that their stock is worth 33 cents on the dollar. Far easier to hold the stock market steady and debase the measuring stick, the dollar. And with Euro weakness, the job just got an order of magnitude easier.
I love a good conspiracy theory as much as the next gold bug, but the elite can kill the other 7 billion of us any time they want. They don’t need subterfuge. Why don’t they just do it? Are they like a cat that plays with a mouse, before eventually killing it? Doubt it.
ash-One other observation, or perhaps question, I have for you. As you mentioned in a post above, the law of land is pretty much irrelevant, and will become more so soon. So why do they need ‘debt’ as the mechanism for enslaving people? Why not just declare martial law and install a totalitarian state? They aren’t very far from that right now.
One must really squint very hard to see even a smidgeon of logic in the ‘deflation’ argument. Using GAAP accounting, the federal govt. (USA) is running a deficit of about $6 trillion/year. That’s 40% of GDP. With any significant economic weakness, it will exceed 50% of GDP easily. But you really expect those ‘out of thin air’ dollars (the portion not from tax revenue) to buy ever larger quantities of goods and services? Is it not apparent that they will never cut spending?
Ash-Been reading TAE for about a year. Sooner or later Foss and the other deflationists will throw in the towel. Or end up like Pretcher and become irrelevant. It appears it won’t be at $4/gal gasoline. Will $6/gal gas do the job? That will be in July, 2012.
We’re five years into the greatest credit bust of all time and consumer prices are still rising, and now even accelerating.
A lot of the ‘money’ that is in danger of getting destroyed isn’t really money. Yes, banks owe each other a thousand trillion in OTC derivatives. But that was never going to be used to buy stuff. It is just for trading within the financial system.
However, if you buy the argument that the world’s central banks will never allow the banking system to fold, then the quadrillion in OTC derivatives means it will take even more QE-X than we ever would have dreamed a few years ago to get the bailout done.
I’m not sure if Batsakis v. Demotsis is a great fit here. Basically, the debtor in that case agreed to absurd terms, out of desperation. In present day USA, it appears that a hyperinflationary wave is about to hit our shores, rendering the creditors as the ones who will be seeking some sort of relief.
Unfortunately, legal precedent is not on the their side. Say for example, someone owes $18,000, which about 10 ounces of gold. They could liquidate their gold holding and pay the debt, but instead just pay the interest payments. Even if the interest rate is 20%, or even higher, if they can just figure out how to hold onto those gold ounces a couple of years, they will be home free.
Gold will soon be $3600/ounce, a double, and then $7200/ounce, another double. And of course silver will go up even faster. Have you spotted the problem? Most Americans don’t have much gold and silver. So both debtors and creditors will lose!!! Only holders of solid assets will gain.
